Palliser Recognizes Progress in Nomination Process for Independent Director Candidates at Keisei Electric Railway

Palliser Capital (“Palliser”) today published a letter regarding progress of the nomination and appointment process for the new Palliser-proposed independent outside director candidates to help reconfigure the Board of Keisei Electric Railway Co., Ltd. (9009 JT) (“Keisei” or the “Company”). Palliser’s letter also addresses important points that were misrepresented in the Company’s press release of April 30 and repeats its call on Kobayashi-CEO and the current Board to focus on measures to resolve the wider governance and capital allocation failings detailed in Palliser’s materials as part of the Company’s new Medium-Term D2 Plan on May 21, 2025.

Full details relating to Palliser's ongoing engagement, including its detailed open letter to the Keisei Board, and accompanying presentation, and independent expert findings are available at KEISEI100.com

Full text of the letter follows:

8 May 2025

3-3-1 Yawata, Ichikawa City, Chiba Prefecture 272-8510

Keisei Electric Railway Co., Ltd. (“Keisei” or the “Company”)

Dear Kobayashi-CEO and the Members of the Keisei Board of Directors

Engagement with Palliser-Proposed Candidates¹

We refer to our open letter to the Keisei Board of Directors on 24 April and the Company’s initial public response on 30 April titled “Notice Regarding the Progress of Dialogue with Palliser” (“Company Statement”). We also refer to the nomination process which is now in-progress in respect of the new Palliser-proposed independent outside director candidates, including the candidate interviews which took place at the Company’s offices yesterday.

As the Company Statement correctly points out, Palliser first wrote to the Board about independent outside director candidates on 5 March, nearly four months ahead of the 2025 AGM and after repeated efforts to engage more broadly after the 2024 AGM. However, some important points were then misrepresented in the Company Statement:

• First:
  • Palliser wrote privately on five separate occasions on 5 March, 12 March, 15 March, 21 March, and 2 April to request a meeting with members of the Nomination/Compensation Committee (“Committee”) regarding Palliser-identified Board candidates. As we repeatedly explained, we identified a number of best-in-class Japanese independent outside director candidates, but it was our and their preference to first gather important information about Keisei’s currently opaque director nomination process, better understand management’s perspectives on Board composition, and gauge the Company’s interest in working collaboratively on a consensual appointment process before finalising our proposals and providing the names of the candidates.
  • After our requests went unaddressed, we provided background information on the candidates on 2 April and put our questions on the nomination process forward in writing – this letter went unanswered.
  • The Board’s persistent refusal to meet with us or respond to our basic questions is, unfortunately, consistent with the rejection of our previous meeting requests on 11 September 2024, 9 October 2024, 31 October 2024, and 6 December 2024. In respect of which, Keisei’s IR team instructed us that having exercised shareholder rights at last year’s AGM, Palliser would now have to “re-earn the right to meet with the Board or Management” despite being one of the Company’s largest shareholders.
  • Following the Committee’s and the wider Board’s refusal to engage constructively, we provided full names of the candidates to the Company privately on 23 April, for the Committee to sincerely consider the candidates.
• Second, contrary, therefore, to what the Company Statement suggests, it is evidently both our genuine intention and expectation that Keisei will nominate the proposed candidates at the AGM. Palliser decided in good faith not to formally exercise shareholder rights to propose the candidates itself, in the belief that the Company would be open-minded and recognise the importance of a consensual process given the multiple shortcomings of the Board’s current configuration. This is why we encouraged the Company to engage in private on multiple occasions to better understand our concerns and how we think these could be easily addressed.
• Third, our open letter did not suggest that the Company had refused to conduct candidate interviews. In fact, we said that we were pleased the Company has finally indicated a willingness to engage with our proposed candidates.

Subsequent to our letter and publication of our analysis, our meeting with Inside Director Oka-san last Friday at the Company’s offices to discuss the director candidates and the positive measures the Company can take, and shareholders expect to see, in the D2 Plan was an encouraging first step. However, further constructive dialogue with Palliser and other shareholders, as Keisei has foreshadowed in the Company Statement, including with the Committee, is needed.

This initial momentum is helpful and encouraging on the assumption that the interviews were conducted in good faith as part of a rigorous, transparent, and objective evaluation of the candidates which implicitly recognises the urgent need for holistic Board reconfiguration at Keisei and the merits of the individual profiles, including their cultural fit. In our view, the nomination of all four of these candidates should be a straightforward matter, if the nomination and review process is conducted appropriately and in good faith by the Committee.

That said, to ensure the Committee conducts a transparent process, we encourage the Company to promptly disclose updates on the status of the nomination process, as well as the comprehensive reconfiguration of the Board at the 2025 AGM, to bring Keisei in line with key peers, as discussed with Director Oka-san and set out in Palliser’s materials.

Finally, following our 24 April letter and accompanying presentation and independent expert report, the Company’s decision to now publish its D2 Plan on 21 May 2025 – a number of weeks later than expected – is a positive step. As discussed, to convincingly address the Company’s persistent underperformance and chronic undervaluation, it is important that the D2 Plan includes a set of credible and transparent peer- and TSE-aligned measures. As explained by the detailed analysis in our 24 April materials, in addition to comprehensive governance measures, this should include a properly calibrated capital allocation framework with a pathway to right-size Keisei’s stake in OLC, a peer-aligned dividend payout ratio and share buyback programme, and performance-linked management compensation. We trust that the Company will take this additional time to reflect further on what’s needed in this regard to ensure that the new MTP showcases an approach that can help rebuild market trust.

While we remain available for further dialogue with Keisei management on the D2 Plan and the appointment of the new independent outside director candidates, we and other Keisei stakeholders expect prompt further detail from the Company on the advancement of the candidates’ nominations and the Board’s proposed governance initiatives to regain market trust and resolve the Company’s undervaluation.

Sincerely,

For and on behalf of

Palliser Capital (UK) Ltd

James Smith

Chief Investment Officer

About Palliser Capital

Palliser Capital is a global multi-strategy fund. Our value-oriented investment philosophy is applied to a broad range of opportunities across the capital structure with a focus on situations where positive change and value enhancement can be achieved through thoughtful, constructive, and long-term engagement with companies and across a range of different stakeholder groups. Palliser Capital is one of the largest Keisei shareholders with a stake in excess of 4.5%.

¹ This letter is sent to you on behalf of Palliser Capital (UK) Ltd (together with its affiliates, “Palliser”, “we”, “us” or “our”).

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